NZ Oil & Gas result better than expected

New Zealand Oil & Gas reported a flat operating profit
for the year ended June but its profit before exploration
expenses was up 12.4% to $76 million from $68 million in the
previous period.

Forsyth Barr broker Andrew Rooney said the result was a good
one, boosted by the recognition of overriding royalty
revenue.

The profit before exploration expenses was $8.8 million ahead
of his forecasts.

Revenue from ordinary activities was up 4% to $103.6 million
from $99.3 million but the profit before income tax and
royalties fell to $25.1 million.

After tax of $7.3 million and royalty expenses of $7.7
million, the reported profit was down 61% to $10.1 million
from $25.9 million.

Mr Rooney said towards the end of the year, the company
announced it had agreed with Genesis Energy on the level of
royalty, which saw $7 million recognised in the accounts.

Origin Energy and NZ Oil & Gas appeared to be close to
settling on a similar basis with Origin royalty revenue
totalling $3.6 million in 2014.

Operating costs were $4.3 million lower than forecast with
the main cause being movement in inventory reducing operating
costs by $6.4 million.

Other features of the result to note were the lift in
exploration costs - up $14.4 million to $29.5 million - most
of which related to the dry hole at Oi, and the high levels
of foreign exchange losses due to the strengthening of the
dollar.

The final dividend of 3 cents per share took the total
dividend to 6cps, in line with expectations.

The dividend was once again unimputed, he said.

''As usual, NZ Oil & Gas has not provided any guidance.
We are expecting more of the same in 2015 with Kupe and Tui
providing a solid earnings stream.''

Forsyth Barr's current forecast for operating profit before
exploration costs was $65 million; no change was expected, Mr
Rooney said.

Company chief executive Andrew Knight said the operational
performance of NZ Oil & Gas had been ''excellent'',
reflected in the strong production and operating cashflow
results.

Production was up 26% on a barrel-of-oil equivalent basis as
a result of a return to full production at Kupe following a
pause for planned maintenance last year.

New seismic surveys were completed in the Canterbury Basin
and off Taranaki.